[Wang Chuan-Fu] started BYD with a modest goal: to edge in on the Japanese-dominated battery business. "Importing batteries from Japan was very expensive," Wang says. "There were import duties, and delivery times were long." He studied Sony and Sanyo patents and took apart batteries to understand how they were made, a "process that involved much trial and error," he says. (Sony and Sanyo later sued BYD, unsuccessfully, for infringing on their patents.)
BYD's breakthrough came when Wang decided to substitute migrant workers for machines. In place of the robotic arms used on Japanese assembly lines, which cost $100,000 or more apiece, BYD actually cut costs by hiring hundreds, then thousands, of people.
"When I first visited the BYD factory, I was shocked," says Daniel Kim, a Merrill Lynch technology analyst based in Hong Kong, who has been to the fully automated production lines in Japan and Korea. "It's a completely different business model." To control quality, BYD broke every job down into basic tasks and applied strict testing protocols. By 2002, BYD had become one of the top four manufacturers worldwide - and the largest Chinese manufacturer - in each of the three rechargeable battery technologies (Li-Ion, NiCad, and NiMH), according to a Harvard Business School case study of the company. And Wang stresses that BYD, unlike Sony and Sanyo, has never faced a recall of its batteries.
Monday, April 13, 2009
Buffett Buys Some BYD
Warren Buffett recently invested in BYD, a Chinese battery-powered car company. Why? Because the business model fits with Buffett's investing philosophy: innovation + low cost production + fanatically hard working staff = profitability.